For candidates preparing for the Estate Agents Qualifying Examination (EAQE) or the Salespersons Qualifying Examination (SQE), understanding the financial mechanics of property closing is non-negotiable. In Hong Kong, what is globally known as a "settlement statement" is more commonly referred to as a Completion Statement and an Apportionment Account.

While solicitors officially draft these documents under the Conveyancing and Property Ordinance (Cap. 219), the Estate Agents Authority (EAA) Code of Ethics requires licensed agents to possess a comprehensive understanding of these calculations. You must be able to accurately explain closing costs to your clients to avoid misrepresentation. For a broader overview of the licensing requirements, visit our Complete Hong Kong Estate Agent Exam Exam Guide.

What is a Completion Statement in Hong Kong?

A Completion Statement is a formalized financial document prepared by the conveyancing solicitors representing the buyer and the seller. It outlines the exact flow of funds required on the designated Completion Date to legally transfer the property title.

This document ensures that the purchase price is fully paid, previous deposits are credited, and all relevant property outgoings (like management fees, government rates, and government rent) are fairly divided between the vendor and the purchaser.

Key Components of a Hong Kong Settlement Statement

Exam questions frequently test your ability to identify which items belong on a completion statement and how they are calculated. Here is a breakdown of the primary components.

1. Purchase Price and Deposits

The foundation of the statement is the agreed-upon property price. Deducted from this are the deposits already paid by the purchaser:

  • Initial Deposit (Provisional Deposit): Usually 3-5% of the purchase price, paid upon signing the Provisional Agreement for Sale and Purchase (PASP).
  • Further Deposit: Paid upon signing the Formal Agreement for Sale and Purchase (FASP), bringing the total deposit typically to 10%.

The remaining 90% is listed as the Balance of Purchase Price.

2. Apportionment of Outgoings

In Hong Kong, property outgoings are usually billed in advance. Because the vendor may have already paid for the entire month or quarter, the purchaser must reimburse the vendor for the period they will own the property. This is calculated in the Apportionment Account.

Standard apportioned items include:

  • Management Fees: Usually billed monthly.
  • Government Rates: Billed quarterly (Jan-Mar, Apr-Jun, Jul-Sep, Oct-Dec).
  • Government Rent: Billed quarterly alongside rates.

Exam Tip: Under standard Hong Kong conveyancing practice, the purchaser is responsible for outgoings inclusive of the day of completion.

3. Stamp Duty Liabilities

Governed by the Stamp Duty Ordinance (Cap. 117), stamp duty is a major closing cost. While not always paid directly to the vendor (it is paid to the Inland Revenue Department via the solicitor), it is a critical part of the buyer's settlement funds. Candidates must be familiar with Ad Valorem Stamp Duty (AVD) scales based on the latest government budgets.

4. Agency Commission and Legal Fees

The statement will also reflect the professional fees owed. Agency commission (typically 1% from the buyer and 1% from the seller, though negotiable) and solicitor conveyancing fees are factored into the final amount the client must prepare.

Visualizing the Buyer's Closing Costs

To help you visualize the financial burden on a purchaser at closing (excluding the actual balance of the property price), review the typical breakdown of closing costs for a mid-market Hong Kong property.

Typical Buyer Closing Costs Breakdown (HKD) - Excl. Property Balance

Practical Walkthrough Scenario: Apportionment Calculation

Let’s look at a practical scenario that mirrors the calculation questions you will face on the EAQE.

The Scenario:

  • Property: A flat in Taikoo Shing
  • Purchase Price: HKD 8,000,000
  • Completion Date: 20th May
  • Deposits Paid: HKD 800,000 (10%)
  • Rates & Gov Rent: HKD 4,500 per quarter (Vendor has already paid for the April-June quarter)
  • Management Fee: HKD 1,500 per month (Vendor has already paid for May)

Step 1: Balance of Purchase Price
HKD 8,000,000 - HKD 800,000 = HKD 7,200,000

Step 2: Apportionment of Rates & Gov Rent (April-June Quarter)
The quarter has 91 days (April: 30, May: 31, June: 30).
The purchaser is responsible from May 20th to June 30th.
Days responsible: 12 days in May (20th to 31st inclusive) + 30 days in June = 42 days.
Calculation: (HKD 4,500 / 91 days) × 42 days = HKD 2,076.92 (Purchaser owes Vendor)

Step 3: Apportionment of Management Fee (May)
May has 31 days.
Purchaser is responsible from May 20th to 31st = 12 days.
Calculation: (HKD 1,500 / 31 days) × 12 days = HKD 580.65 (Purchaser owes Vendor)

Final Balance to Complete (payable to Vendor's Solicitor):
HKD 7,200,000 + HKD 2,076.92 + HKD 580.65 = HKD 7,202,657.57

Essential Tips for the EAQE Exam

When preparing for the exam, remember that the EAA expects you to act with due diligence. Miscalculating or failing to advise a purchaser of their stamp duty or apportionment liabilities can lead to disciplinary action.

If the property is sold subject to an existing tenancy, the settlement statement will also include the transfer of the tenant's rental deposit from the vendor to the purchaser, and an apportionment of the current month's rent. For more on handling tenanted properties, review our guide on Lease Types and Terms.

Because mathematical questions can be time-consuming, we highly recommend practicing these calculations repeatedly. Check out our Estate Agent Practice Test Strategies to learn how to manage your time effectively during the math-heavy portions of the exam.

Frequently Asked Questions (FAQs)

1. Who prepares the Completion Statement and Apportionment Account in Hong Kong?

The vendor's solicitor typically drafts the initial Apportionment Account and sends it to the purchaser's solicitor for approval prior to the completion date. Both solicitors work together to finalize the Completion Statement.

2. Who bears the outgoings on the actual day of completion?

Under standard conveyancing practice in Hong Kong, the purchaser is responsible for the property's outgoings (rates, management fees, etc.) inclusive of the actual day of completion. The vendor's responsibility ends at midnight the day before completion.

3. Are agency commissions included in the solicitor's completion statement?

Agency commissions are not strictly part of the vendor-purchaser apportionment account, but the purchaser's solicitor will often include the agency fee in the overall settlement breakdown they provide to the buyer to ensure all funds are prepared (if the solicitor is instructed to pay the agency on the buyer's behalf).

4. What happens to a tenant's rental deposit on the settlement statement?

If a property is sold with an existing tenancy, the rental deposit held by the vendor is usually credited to the purchaser in the completion statement. The purchaser then assumes the liability to refund the tenant at the end of the lease.

5. How does a mortgage affect the settlement statement?

If the purchaser is using a mortgage, the statement will show the mortgage advance coming from the bank. The purchaser only needs to provide the "equity balance" (the difference between the total funds required and the mortgage loan amount) to their solicitor prior to completion.